Monday, September 14, 2009

Health Care Reform .... It's Really Not That Hard

How have large corporations been driving out cost, increasing transparency and competitiveness within their global sourcing models? Not many use one service provider for all of their IT or BPO requirements - they create a competitive ecosystem and multi-source to competitive providers who fight for new projects and new contracts. It keeps the suppliers on their toes, keeps prices competitive, and (should) help improve productivity as providers also compete on quality and outcome-based goals. The key caveat is to ensure this ecosystem is managed effectively to ensure service providers are meeting quality standards, service levels etc. A healthy ecosystem of service providers, eager to compete for business is creating downward pressure on prices, increased customer choice, and also a quality dimension where providers need to create more innovative customer offerings in order to differentiate themselves.

Seems to me the answer with the US health insurance providers, is to create a similar ecosystem where there are more providers in play, where they are held to certain standards, and are regulated with how they price their services. The caveat is to ensure this ecosystem is managed effectively. If the government can help kick-start this ecosystem, them I'm all for reform. The key is to create a competitive environment where the government only needs to step in to ensure everyone in playing by the rules.

But .... how should they accomplish that?

The problem with a government insurance alternative is that it won't create a competetive market. Subsized health insurance is not playing on a level field as private health care. The appearance of lower cost (not taking into account the taxpayer subsidized premiums) premiums to an employer will be too big a carrot for them not to bite.

As more and more people are driven to the illusion of lower cost government health care, it will drive up the cost of premiums for the rest of the private health insurance holders. At some point, either only the extremely wealthy will have private insurance, or they will be self insured. At that point, the only option will be government health care.

It will be like the worst of all the HMO's as there will be no competition and no incentive for efficiency or effectiveness, since the motivation will be power and self preservation of bureaucratic jobs.

If people were allowed to purchase insurance across state lines, and if the for profit trial lawyers were limited in their insurance claims (thus discouraging multi-million dollar lawsuits, and as an added result, lower cost by negating the need for numerous unnecessary tests so doctors would not need to fear malpractice suits due to negligence charges), we could start to see some real reform in the medical field.

For starters ... I believe the 1st step must acknowledge that there are over 1000 health care insurors in the US. The problem is that they may not compete across state lines. Eliminate that provision and you have instant private sector competition. No need for the extra-constitutional federal intervention. Regulation is the problem. Remove the regulation which does not allow for free transactions within the insurance delivery system.